IMPACT OF FINTECH ON POVERTY REDUCTION: A STUDY OF SELECTED SOCIOECONOMIC FACTORS WITH SPECIAL REFERENCE TO UPI IN INDIA

Abstract

Digital financial systems are becoming essential tools to improve financial inclusion and alleviate poverty in developing economies. The Unified Payments Interface (UPI) is also India's flagship digital public good that has revolutionised the payment ecosystem through instant, low cost, bank linked payments which are now accessible for all income and generational groups. In FY 2024–25, UPI has emerged as one of the world's largest real-time payment systems with nearly 185.8 billion transactions valued at ₹260.6 lakh crore. However, the evidence from the micro level that there is any relationship between poverty reduction and intensity of UPI use, and how this relationship occurs is still limited. The thesis examines the link between the use of FinTech or UPI, financial inclusion and the multidimensional poverty outcomes of 400 households in the National Capital Territory (NCT) of Delhi. The data were gathered using a structured household survey questionnaire with socioeconomic profile, UPI usage intensity (5 items), financial inclusion (8 items) and multidimensional poverty and living standards (5 items) through stratified random sampling by generational and income cohort. The analysis used was Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA), and the Structural Equation Modelling (SEM). The following four hypotheses were tested: (H1) UPI usage intensity positively affects financial inclusion; (H2) financial inclusion has a positive effect on multidimensional household poverty; (H3) financial inclusion positively affects household welfare; and (H4) financial inclusion mediates the relationship of UPI and poverty. The measurement model was reliable, with Cronbach's α values of 0.931 for UPI Usage Intensity, and valid with all Average Variance Extracted (AVE) values > 0.50. Support for all four structural hypotheses was found. The usage intensity of UPI had a strong positive effect on financial inclusion (β = 0.744, p<0.001), and financial inclusion significantly reduced multidimensional poverty (β = 0.476, p<0.001). A direct positive effect of the usage v of UPI on welfare was found (β = 0.268, p<0.001), and the indirect path through financial inclusion was also significant (β = 0.354, p<0.001), which confirmed the partial mediation. The results support a usage intensity approach to financial inclusion, showing that the intensity of UPI use yields welfare gains, rather than just access. The thesis ends by proposing policy options such as broadening QR code acceptance in the informal markets, integrating UPI transaction with the formal credit assessment and extending the integration of UPI with Direct Benefit Transfer (DBT) schemes. Technology: UPI, Financial Inclusion, Digital Payments, SEM, Financial Inclusion, Financial Technologies, Village Level Welfare.